Importance Of Supply And Demand

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Economics is an extremely important aspect of the today’s society, especially, since it aids in the allocation of limited resources. Supply and demand are aspects and fundamental concepts of economics, which is considered the foundation of a market economy. In fact, the association between demand and supply underlie the forces responsible for the allocation of resources. Therefore, given the importance of supply and demand and its impact on the market economy, one will elaborate on the law of supply and demand. In addition, one will discuss how these fundamental concepts of economics apply and impact the prices of Airline tickets.
What does supply and demand mean? Demand indicates the quantity of a product or service that is aspired by …show more content…

In other words, the law of demand states that, if the price of a product or service is high, then the demand for that product or service will decrease. Consequently, people are prone to purchase items at a low cost. Therefore, when the prices are high, people will most likely exercise their opportunity cost option of buying that particular product or service. Opportunity cost, according to the book Economic Logic (2014), is simply the alternative that is relinquished when a choice is made. Which, given the fluctuation in prices is often …show more content…

For example, the chart would reflect the correlation between demand and the products price, or in the case of supply, the supplied products and its price. Moreover, supply, demand, and price, along with supply elasticity can be graphed and analyzed. This particular method of tracking and analyzing data is essential in identifying the markets status and determining the best plausible route (Skousen, 2014). By studying supply and demand, one is also able to identify whether an excess or a shortage in demand or supply is occurring, or whether an equilibrium has been attained. Consequently, it is evident that supply and demand take part in the market economy and greatly influence and impact the price value. Furthermore, to express how supply and demand impacts the price value, the price value of airline tickets will be utilized as an

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